2022 (5) TMI 508 - AT - Income Tax

Estimation of income - Addition u/s 69C of the Act for bogus purchases - HELD THAT - CIT(A) has followed the finding in the case of Saraswathi Oil Traders versus CIT 2002 (1) TMI 3 - SUPREME COURT and upheld only additional profit element earned by the assessee on the bogus purchases. In the circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and we accordingly, uphold the addition for bogus purchases in all the three assessment years. Addition u/s 68 - negative cash balance in the cash flow statement prepared by the assessee for justifying cash deposits in bank account - HELD THAT - AO has considered the cash flow statement produced by the assessee to explain the cash deposits in bank account found during the course of the survey proceedings carried out at the premises of the assessee. In such cash flow statement, negative cash balance was observed by the assessee and same was treated as unexplained cash credit. The subsequent computer-generated cash book filed during appellate proceeding before the Ld. CIT(A), has not been accepted in absence of original cash book for verification. In our opinion, in absence of original cash book produced by the assessee, the Ld. CIT(A) is justified in upholding the addition for negative cash balance observed in cash flow statement filed during the course of assessment proceeding. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and we accordingly uphold the addition made under section 68 of the Act for negative cash balance observed in all the three assessment years. Assessee appeal dismissed.

Summary

Issues:
- Addition under section 69C of the Act for bogus purchases
- Addition under section 68 of the Act for negative cash balance in the cash flow statement

Analysis:
1. Addition under section 69C for bogus purchases:
- The appellant, engaged in wholesale trading of iron and steel items, faced disallowance of Rs. 1,64,45,105/- as bogus purchases, leading to an addition under section 69C of the Act. The Sales Tax Department provided information on 10 bogus concerns, prompting the AO to add the amount under section 69C. The appellant contended genuine purchases and proper payments through banking channels, citing lack of evidence from the AO beyond the Sales Tax Department's list. The AO's arguments included absence of lorry receipts, suppliers listed as hawala operators, and non-compliance with notices. The CIT(A) upheld a profit element of 12.5% on disputed purchases, citing precedents and the appellant's banking transactions. The ITAT found no error in the CIT(A)'s order, upholding the addition for bogus purchases across the three assessment years.

2. Addition under section 68 for negative cash balance:
- During a survey, the appellant deposited cash totaling Rs. 46,39,000/- in the bank account, leading to scrutiny of a negative cash balance of Rs. 37,28,276/- in the cash flow statement. The AO treated this as unexplained cash credit under section 68. Despite the appellant's submission of a positive cash balance in the cash book, a remand report highlighted discrepancies, with the AO disputing the appellant's claims. The CIT(A, after considering the remand report, confirmed the addition, emphasizing the lack of original cash book for verification. The ITAT upheld the addition for negative cash balance, as observed in the cash flow statement, across all three assessment years.

In conclusion, the ITAT dismissed all three appeals by the assessee, upholding the additions for bogus purchases and negative cash balance made by the CIT(A) in the respective assessment years. The appellant's arguments regarding genuine purchases and positive cash balance were not substantiated adequately, leading to the confirmation of the additions under sections 69C and 68 of the Act.